2024 (5) TMI 531 - AT - Income Tax

Assessee wins unexplained cash deposits case under section 69A with proven opening balance availability

Sri Nanjappa Umashanker Versus ITO Ward-4 (2) (1), Bangalore

ITAT Bangalore ruled in favor of the assessee regarding unexplained cash deposits under section 69A. The assessee demonstrated an opening balance of ... Addition made u/s. 69A - unexplained cash deposits - Rejection of books of accounts - Time Gap between withdrawal and deposits in the banks account - whether assessee has duly discharged the onus cast upon him? - Main contention of ld. A.R. is that the assessee is having opening balance as on 31.3.2016 at Rs.19,71,244/- as disclosed to the department in ITR-4 filed for the assessment year 2016-17, thus this amount is available to the assessee to deposit it into these two bank accounts - HELD THAT:- The department has no contra evidence to deny the availability of said opening balance to deposit into assessee’s bank accounts. Similar issue came for consideration before this Tribunal in the case of Shri Narayana Shibaroor Shibaraya [2022 (11) TMI 1112 - ITAT BANGALORE] wherein as held that if the revenue wants to disbelieve the plea of the Assessee then it must show that the previous withdrawal of cash would not have been available with the Assessee on the date of deposit of cash in the bank account. The AO and CIT(A) have proceeded purely on assumption and surmises that cash withdrawn was not available to the Assessee on completely extraneous factors - Assessee has satisfactorily explained the source of funds out of which deposit of cash was made in the bank account. Decided in favour of assessee. Issues Involved:1. Legality of the order passed by the Commissioner of Income Tax (Appeals).2. Whether the addition of Rs. 16 lakhs as unexplained money under Sec. 69A was justified.3. Validity of the sources of cash deposits explained by the appellant.4. Evaluation of the Commissioner of Income Tax (Appeals)' assumptions regarding the cash held by the appellant.5. Adoption of the 'theory of probability' by the Commissioner of Income Tax (Appeals).6. Assessment of the appellant's income in relation to the cash deposits.7. Requirement and validity of maintaining a cash book.8. Consideration of the cash book maintained by the appellant.9. Satisfaction of conditions under Sec. 69A for invoking its provisions.Summary:1. Legality of the Order:The appellant contended that the order passed by the Commissioner of Income Tax (Appeals) was opposed to law and facts of the case.2. Addition of Rs. 16 Lakhs as Unexplained Money:The Commissioner of Income Tax (Appeals) confirmed the addition of Rs. 16 lakhs as unexplained money under Sec. 69A. The appellant argued that the sources of the cash deposits were duly explained through legitimate sources, including the opening cash balance and income from previous years.3. Validity of Sources Explained:The appellant provided explanations and documents, including a balance sheet and income and expenditure account, indicating an opening cash balance of Rs. 19,71,244 as of 31-03-2016. The Commissioner, however, disregarded these explanations and treated the cash deposits as unexplained money.4. Assumptions Regarding Cash Held:The Commissioner assumed that the cash held by the appellant was too distant in time to have remained intact and thus was unexplained. The appellant argued that this assumption was erroneous and based on mere surmise rather than empirical evidence.5. Adoption of 'Theory of Probability':The Commissioner upheld the additions under Sec. 69A by adopting the 'theory of probability' without refuting actual facts on cogent grounds. The appellant cited various legal precedents to argue that the addition based on probability rather than concrete evidence was unjustified.6. Assessment of Income in Relation to Cash Deposits:The Commissioner held that the appellant's income was not commensurate to explain the cash deposits. The appellant countered that his income from various sources, including rental and business income, was sufficient to justify the cash deposits.7. Requirement and Validity of Maintaining a Cash Book:The Commissioner stated that the appellant was not required to maintain a cash book, thus treating the cash book submitted as a 'self-serving document.' The appellant argued that under Sec. 44AA(2), he was required to maintain books of accounts and had duly done so.8. Consideration of the Cash Book:The Commissioner disregarded the cash book maintained by the appellant, stating that it did not back the transactions in the bank accounts and income tax returns. The appellant contended that the cash book was compiled based on legitimate documents and constituted irrefutable evidence.9. Satisfaction of Conditions under Sec. 69A:The appellant argued that the conditions for invoking Sec. 69A were not satisfied, as the cash deposits were recorded in the books of accounts. The Commissioner failed to provide any counter-evidence to dispute the appellant's explanations.Conclusion:The appeal was allowed, and the addition of Rs. 16 lakhs under Sec. 69A was deleted. The Tribunal held that the appellant had satisfactorily explained the source of the cash deposits, and the Commissioner had erred in confirming the additions based on assumptions and the 'theory of probability' without concrete evidence. The Tribunal also emphasized the importance of maintaining proper books of accounts and the validity of the cash book submitted by the appellant.